What the ‘Sharing Economy’ Costs Workers

Behind the wheel of a Lyft driver's vehicle in San Francisco's Potrero Hill neighborhood.

Behind the wheel of a Lyft driver's vehicle in San Francisco's Potrero Hill neighborhood. (Sara Bloomberg/KQED)

I worked in the so-called sharing economy for about a year, driving for the ride company Lyft. I was doing it to make a podcast, and it was a convenient vehicle for that.

But I had concerns. It seemed like the income kept falling and would keep falling if no one regulated the number of drivers. I was unsure about insurance coverage. Most of all, I felt like driving for Lyft was taking money out of the pockets of cab drivers.

Current Lyft driver Dan Carrigan has some of the same concerns. He says he does not feel like his interests as an individual are a priority for the company, nor does he feel protected.

“You can only trust a process to a certain extent,” Carrigan says. “Nobody is taking care of you in this business.”

As someone with aspirations to be self-employed — an entrepreneur of some kind — Carrigan is drawn to the sharing economy. There seem to be all kinds of possibilities for people, like running errands on TaskRabbit, providing services through Fiverr, or cleaning houses for Handy.

Carrigan started by trying to rent out his apartment on Airbnb, but he stopped because he was worried about getting evicted. So now he is driving for Lyft.

Carrigan says he drives to pay his bills. He was laid off from his previous job and wanted flexibility while he figured out what to do next. At first it seemed great, and he thought he could do it for a few years. But now he says he has realized there is not enough stability because as a driver he is replaceable.

“You’re part of a pool, you are really part of a pool,” Carrigan says, “so if suddenly companies could pay much less to drivers, and there were still drivers willing to drive for that rate, they would. And the rates are going lower and lower and lower.”

Lyft Says It’s Listening

Lyft says it listens to drivers, and that it has recently improved the tipping system. In the summer, Lyft let drivers keep all their earnings. But now it takes a 20 percent commission on each fare.

Lyft representative Katie Dally told KQED via email:

“Lyft’s commission is 20 percent of each trip cost — and drivers keep 100 percent of tips from passengers. Lyft is also the only ridesharing platform to offer drivers an opportunity to earn a percentage of their weekly earnings as a bonus. The more drivers drive, the more they can earn, up to 20 percent.”

In other words, if they drive enough, they earn back the commission.

Carrigan says he makes between $25 and $31 an hour, and that is before insurance, gas, taxes and car upkeep. It is less than I made a year ago, and Carrigan says the income continues to fall.

Dan Carrigan drives for Lyft to help pay the bills. (Sam Harnett/KQED)
Dan Carrigan drives for Lyft to help pay the bills. (Sam Harnett/KQED)

As for earning the bonuses for logging more hours, Carrigan says that makes it more like a regular job, which is not what he signed up for.

“It would be nice to know that I could do this for a while without it changing,” Carrigan says, “but the way things are now, I’m looking for work.”

Union Organizing Begins

In Los Angeles, some drivers for Lyft’s competitor, Uber, are trying to organize a union so they can achieve more stability and a stronger voice within the company.

A local chapter of the Teamsters union is giving them support and advice. Teamsters spokesman Galen Munroe says that when it comes down to it, this is just the same old story — companies using part-time workers to cut costs.

These companies “don’t want the responsibilities or the costs associated with direct employees,” Munroe says, “and to a certain degree we feel that this is misclassification.”

There is a fine line between contract worker and employee, and it is causing trouble for these new gig sites. Uber faces lawsuits, as does  Handy.  The claims are that they control workers like employees, but do not give them benefits.

That is the dark side of these companies, says Gerald Friedman, economics professor at the University of Massachusetts Amherst. Friedman adds that by cleverly branding this work as the sharing economy, these tech companies are normalizing what is really unprotected, deregulated contract labor.

Friedman says these tech platforms are “used to deny workers protections that we established in the New Deal era to protect people against unemployment, health crisis and to protect people’s work safety.”

The way the gigs on these sites are pitched, Friedman says, sounds kind of like the worker utopia described by Karl Marx, where one could hunt in the morning, fish in the afternoon, and do criticism in the evening, without having to become a hunter, a fisherman or a critic.

That kind of flexibility is desirable, he says, but in our modern capitalist society such gig work brings a harsh reality of less protection and more instability.

To that charge, Lyft makes the case that its workers can purchase health insurance on their own now, with the Affordable Care Act. And the company says drivers work for them precisely because they don’t want an employer, or because they already have one and just want to make money on the side.  The point here is the freedom that Lyft provides.

Impacts on Taxi Drivers

Of course what may be freedom for the ride-service drivers has impacts on others,  such as San Francisco cabbie Harbir Batth. He says taxi drivers in this city used to have the kind of gig advertised by these tech companies: flexible decent pay, plus even some protection and stability.

“We never had a union. It is kind of a self-employed industry,” Batth says. “Everybody is divided. It’s a cash business, you know.”

Now Batth says these new, less regulated companies are stealing his business and killing his profession. So, like those Uber drivers in L.A., Batth and others are unionizing.

“If you have done something for 25 or 30 years, you are old,” he says, “you have no other option. You can’t look for a change of career.”

Batth has been driving a cab for 22 years, and in 2012, he finally got his dream: a medallion. It allows him to rent a cab to another person, so he can make income without having to drive. It cost $250,000, he says, and Batth borrowed money to make the down payment.

“I thought I will retire after 10 years or so,” Batth says, “I thought I could pay off the loan and have a little income to live off of. But now it’s all down the drain.”

Batth says he would sell the medallion if he could, but now nobody wants to buy one. With a child headed to college and another in third grade, plus the loan payments for the medallion, Batth says he has no option but to keep driving — for less money.

What the ‘Sharing Economy’ Costs Workers 18 December,2014Sam Harnett

  • David D.

    The sharing economy is at risk of becoming just another regular market force when it becomes too popular. The origins of companies like Lyft, Sidecar, and AirBNB seem to be in people who already have something (cars and homes) sharing them with others at a reduced price (since they already invested in them anyway).

    However, distaste for the taxi and hotel industries have made these services so popular that some people now seek out for full-time employment in the sharing economy, either as a driver (Lyft and Sidecar) or amateur landlord (AirBNB). It also presented an opportunity for an established company (Uber) to exploit an under-served market (people who dislike taxis), perhaps suggesting a move towards a more mainstream business presence.

    The taxi industry is finally paying attention–perhaps too little too late–and the hotel industry seems uninterested in keep the competition away. What happens next is anyone’s guess. In the meantime, folks like me who have a car and just want to share it now and then will drive for Lyft, etc. and hope for the best. If the sharing economy becomes the regular economy, I’ll probably go back to using my car just for myself. But I’m sure someone will be there to replace me.

  • crazyvag

    In 2010, only 4 years ago, I remember trying to hail a cab for 1 hour at 1am on a Friday night. That was right after the taxi rates for SF cabs were raised to highest in the nation. Let’s not forget how bad things were before Lyft and Uber.

    • 1Lionel

      Lyft and Uber are fine so long as they have to abide by the same regs as taxis with regard to liability insurance and driver background checks. They are clearly better as a model as they are GPS based and plentiful. That said, having two sets of rules one for taxis and (n)one for the Lyfts of the world makes for a very unlevel playing field

Author

Sam Harnett

Sam Harnett is a reporter who covers tech and work at KQED. For the last five years he has been reporting on how technology and capitalism are changing the way we think about ourselves and what it means to work. He is the co-creator of The World According to Sound, a 90-second podcast that features different sounds and the stories behind them.

Before coming to KQED, Sam worked as an independent reporter who contributed regularly to The California Report, Marketplace, The World and NPR. In 2013, he launched a podcast called Driving With Strangers. In 2014, he was selected by the International Center for Journalists for a reporting fellowship in Japan, where he covered the legacy of the Fukushima disaster.

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